The Nexus of Bitcoin and Gold

Josh Crumb of Goldmoney provides a unique take on the monetary attributes of gold, making the argument for investing in the precious metal, rather than saving. Getting beyond the true religion of gold ownership, Josh looks to the future of money and the intersection between gold and cryptocurrencies. Filmed on April 12, 2017, in New York.

Comments

How about we use gold as a store of value only, and use currency as the MoE as it is supremely suited to do? And do away with the paper gold market. Gold is not consumed like commodities are. There's a massive stock to flow ratio. Hoarding it doesnt infringe on other peoples right to consume commodities to meet their needs for living.

Interesting presentation.
I transferred $525,000.00 to buy gold from GOLD MONEY , but requested the funds back in order to wait for a better price. They have hesitated and even asked me to keep my money there while waiting for my. price target. They flat out refused to transfer my money back. They opened the account on our faxed documents. Sylvie Loit, head of compliance approved. Now they are looking for excuses now to transfer our funds. What kind of business is that?

Hi Carol, I'm glad to hear the matter has been resolved. We value integrity and client service above all else, we seek no benefit in holding client cash. I was not involved or briefed directly in this matter, but moving such wires internationally is always a bit tricky (for any banks or financial services), and as a regulated entity we also must check many, many boxes when handling client funds. Again, I'm sorry to hear there was some friction, and glad the matter was resolved. All the best, Josh

What is better then a store of value? The growth of value. Just read Siegel and see his first chart on gold, stocks and money. Gold holds its value, the sp500 + reinvested dividends, cost average investing and equal weighted and you will find that stocks give you a 6-10 Percent Return. So why in hell invest in gold? Where are the yachts of gold investors, where is the Warren Buffet of the gold investors?

Where? Ask - Pierre Lassonde, Rob Mcewen, Tom Kaplan, Seymour Schulich, Ross Beatty, Eric Sprott, Eduardo Hochschild... the list can go on and on. Just because they haven't been as busy marketing themselves doesn't mean they don't exist (billionaire gold investors with yachts and planes). As for your other point, it's simply wrong. The SP500 is an "Index" which has to be mirrored or emulated in some type of a legal entity "fund". That "fund" has to be managed by humans who charge fees and crystalize gains (paying taxes) along the way. Indexes being purely model drive, shuffle through companies, rebalancings, tax events, and ocassionally even update their methodologies first, with investors being forced to follow suit and deal with the market reflexivity themselves. The result, is that no Index "Fund" has been able to outperform poor old Gold, if you stretch the timescale back enough (50-70 years). It's no coincidence, given enough time, and most returns trend to zero. We live in a unique era where free money has obfuscated this obvious fact of life.

well, then just buy the sp500 etf, best one that is equal weighted and outperform gold. Just read Siegel page 7 --> https://www.amazon.de/Stocks-Long-Run-Definitive-Investment/dp/0071800514/ref=sr_1_1?ie=UTF8&qid=1493963658&sr=8-1&keywords=siegel+stocks#reader_0071800514: from 1802 - 2004 gold went from 1 to 4.52 and stocks from 1 to 704.997 and cash and money to 0.05. So yeah, gold is a store of value, but why should I invest in a store, if I can invest in companies, that do not store the value but even grow it?

Again Andeas, I was not trying to say that investors should take no risk or that gold outperforms everything. All I was trying to say is that we shouldn't be fooled by improper measurement. An index is a trick of measurement, only 19% of managers actually outperform it (and the explosion of index-chasing ETFs and low cost robo-advisers hasn't even been tested though a full business/credit cycle to see how they play out through a bear market - the risk-side of risk-reward trade off). A significant part of the the S&P is now advertising-levered "platform" tech stocks that requires more and more cheap capital to acquire customers, buy back stock, and maintain their growth multiples and record high PEs. There are some good businesses that will outperform gold over the long run (very, very few however..and we of course have a business model that strives to do that), and most can outperform gold within a cycle with cheap credit, but you need to know what money to hold when the cycle turns. Central banks are on a path to always and everywhere bail out the credit cycle, do whatever it takes, so of course real rates will go negative and discounting the terminal value of growth stocks will give them an insane boost from cheap credit. Tech 1.0 was about building IP & infrastructure, added productivity to supply chains, but tech 2.0 is about using that infrastructure to data mine the s*it out of the population through advertising and manipulation. These index dominating, "outperfoming", tech companies are destroying human capital, destroying media and retail supply chains, and the long term retail brand moats built by companies that used to served their customers and employees. They are destroying physical "main street economy" infrastructure without the long term cash flow or labor base to actually build long term capital in an economy, and many have yet to prove they can actually make cash flow though a recession. The rate of S&P company death is accelerating, and I've yet to see many great companies that do anything for the economy other than mine the populace for data or financial service (in tech you are the product, in banking you are now the customer, not the client or creditor). You can thank the central bankers and their negative real rates for this bizzaro world of real economy capital destruction. Sorry, but a data network of cat videos will not (is not) increasing productivity or prosperity in the economy, so its mining the long term earnings base of the rest of the companies in the S&P "for the long run". Lets see how this plays out. I'll keep my cash in gold until i see real companies providing real value to their clients, employees, and society. Only those kind of companies can sustainability outperform gold in the long run.

I believe a lot of the sturm und drang regarding gold's real returns could be resolved by not misconstruing gold as an investment. Investment entails risk and expectations of return. Gold's elemental properties have been confirmed multiculturally, across millennia, as being near risk free. So why should anyone expect sizzling returns from the closest approximation to 'risk free' in this mortal dimension? Capital assets efficiently maximize return, gold robustly minimizes your maximum regret. Both play a vital role.

People seem to be scared to invest in gold because of the (real or perceived) control/manipulation, esp in the paper form.
Great interview Josh and Grant. Really articulate explanation. I especially love that you are a forward thinker and trying to give people choice, moving away from old school financial institutions.

The thing that is so clear to me now is that fiat money can never, ever have forced artificial low interest rates without tons of bad things happening. We are controlled by idiots or in effect, evil people, ultimately.

Thanks for this great interview. I really appreciated the engineer's perspective. Looking forward to read the reports! One thing that I would point out though is that in my opinion the invisible hand of central bankers may be far greater than Josh thinks. About that conversation with the central banker "I was just particularly confrontational that day. And I just told them right back, you know what? You That's great. There's a market that has a view right back. It's called price. And so whatever your views are, there's a price. That's what I'm trying to understand.” I would argue that this market Josh refers to does not really exist at the moment. At least the price of paper gold is still highly in the hands of banks (manipulation proved) and central banks (conspiracy theory? http://www.zerohedge.com/news/2012-12-28/fleecebook-meet-benoit-gilson-head-foreign-exchange-gold-bis ), and they still seem to be able to influence that price quite efficiently with regular naked shorts in the futures market and a good amount of leverage on unallocated gold accounts (or more creative repos? http://www.zerohedge.com/news/2014-12-04/inside-look-shocking-role-gold-new-normal). Of course this makes owning gold not less appealing, especially not if one were to bet that central banks were to lose control sooner than later. However, in my opinion this price manipulation significantly dampens the spread in popularity of owning gold to larger masses (yet?). And here the key is of course physical gold as paper gold can maybe still be pushed around for a long time.

Just to be clear, I didn't start my company because I love gold, but because I love the invisible hand of decentralization and the values of an open society. I reconciled that gold works as a great measurement tool, it's most important attribute. My money has gone more than100x to 1 into investing in solutions to our society's problems, not gold. Anyone enjoying the fruits of this wonderful Central Bank bubble in everything should be doing the same, with urgency.

What exactly did I say that was doom and gloom? I was talking about objective problems with our money and financial system. Please feel free to falsify anything I said. I think most would agree that we have objective problems with our political systems and institutions. Why? I call this observing reality, observing what markets are telling us, and asking questions about what we should do about it. Some may chose to own gold, and if you listen to my message, I didn't even recommend that one time. I just recommend that people think about their money and measuring systems. It's easy for assets to be at an all time "high" if measured by a denominator near an all time low (negative real rates and decaying unit of value). That's not hope and optimism working out while our institutions are breaking, that's just a bad measurement framework. My goal, whether views are right or wrong, is to force the discussion that nobody seems to want to have. Our currency is breaking, objectively, and the engineers and entrepreneurs need to step forward with some solutions.

YEP, Iam with RV since August 2015, lots of good ideas, but 90% of the people here come from the same sentiment (usually not bullish on stocks (to frame it carefully), very critical against Federal Reserve and central banks, not accepting the new normal of low interest rates, traumatized by 2000 and 2008. Fortune is, that stray reflection, Famy and other (10% of the interviews max) bull cases here on RV made much more sense to me then the bear cases and beeing therefore up 65% since Feb 2016 and a great bitcoin long trade since Dez 2015 (based on the interviews here on RV). So RV makes a good job to me for forming my own opinion to position in the market, but it gets a little heavy on the bearisch side and I never heard: "wow, we been simply plain wrong on our bear case, the stock market rallied so we where wrong (in that situation then its usually the central banks fault)." Do not get me wrong, the interview is great, but I have to support what RAJ I think tried to express, that the sentiment comes too heavy from one direction...

Is it that RV explicitly seeks out doom and gloom? Or is it that RV explicitly seeks out interesting people from different fields of study, different countries, different generations and from that there is an echo - sometimes faint, sometimes loud, sometimes absent - that something is wrong? I believe it is the latter and that to me is incredibly valuable.

100% by terms of service and law. 3rd party settlemt & reconciliation of bars (account trades not confirmed & settled until vault custodian confirms), client segregated vault accounts (operating company can't claim and use client assets). Audited, regulated, 3rd party auditing of controls. All of this can be done with contracts and rule of law like all other asset classes. We just do it all faster and cheaper than others with the technology and architecture of our systems.

I found the book "The Golden Constant" by Roy Jastram a very interesting study of gold's purchasing power. The author compares an index of the price of gold to an index of wholesale commodity prices over a period of 400 years (1580-1976). The author found that the purchasing power of gold, although deviating substantially for significant periods of time, nevertheless moved around a constant level in the long run.

If they ensure the supply is fixed and they relinquish control of interest rates and capital flows then that it would seriously harm bitcoin. But I can't see that happening at all. Most likely bityuan will work the same as regular yuan which is already mostly digital.

Gold is only a store of value if whatever the prevailing society is at the time collectively decides to assign value to it. It may be that throughout history it has been a store of value for this reason. But society could have chosen to consider any number of other things a store of value. Today's collective society has decided to assign a store of value to paper currency. So please have your interviewee explain the difference between gold and paper currency in this context? This is what I don't get about gold.

Actually, Josh elucidated very clearly on this question in the course of the interview. Did you actually view the interview at all? Or did you simply see the subject matter and immediately jump to the comment section?

Exactly William S. The commenter misses the point made by Josh which is that in his view, gold's ascension as the premeir commodity money is due to its natural, elemental, properties. The collective "society" has always decided gold should be money because it simply was in nature. It was the natural surplus which "lasts".

Ryan, this is exactly the kind of meaningless talking point that clouds reason when it comes to money. This subjective view of everything adds no value to the marketplace. Don't tell me "could have chosen anything", the FACT is we didn't, we chose gold everywhere and always. Why? That's what I focus on.
The MARKET never stoped using gold, never stoped pricing gold as a store of value, even if 100 out of 100 economists tell you otherwise. They are factually wrong, end of story. Many individual participants in the market in the market may bought this hubris, maybe even a majority, and say things like "could chose anything for value", but Mr. Market did not, he chose gold. Price isn't set by number of votes, but value of votes. Listen to the market, not subjective nonsense in the pseudo sciences. The economist that say gold is not a good store of value are factually wrong on objective measurement, I don't care about their theories on "could chose anything". A prominent former central banker tried to tell once that we could have chosen copper instead of gold, the value differential is subjective. Wrong. The FACT is, in the first known written text, the value ration between copper and gold (and even silver and gold), is basically the same ration today. All of written history. Why?
As for a collective decision to use fiat, that is also incorrect. The market chooses many assets to hold as a store of value, and objectively fiat money is a terrible store of value compared to just about any other macro asset. We use it collectively as a "commodity", but smart savers & investors hold real assets that appreciate over time versus their depreciating units of fiat. That's a fact, not collective subjectivity; home buyers chose houses, gold buyers chose gold, etc. What the market is telling us with relative pricing is that asset buyers chose better. People that listen to this hubris that "fiat money is safe, has worked as good money, has low inflation" are getting duped, objectively, while everyone smart is shorting this hubris buy buying assets (ANY non fiat asset that is near all time highs while real rates are at all time lows).

The dynamic you are forgetting is legal tender laws. They force you to pay taxes in the Ruling Class's favored scrip and they give you tons of legal grief when you try to use other things as money. Central banks can’t push the economy around and finance excess government power without legal tender laws. It OBVIOUSLY makes for an unfair, regressive and unproductive economy in the long run. ***The masses had to be duped into this arrangement, and they were.***

It is reasonable to believe that the Chinese government will issue Bityuan and outlaw the use of Bitcoin in China. This possibility became evident when the Hawaii legislature forced all Hawaii-addressed Coinbase accounts to be closed within 30 days. If Hawaii could do this so easily, so can other governments. DLS

Plenty of wallet providers other than Coinbase; not all of whom require a strong ID check. There's also the hardware wallet option, such as buying a Trezor. Shutting down Coinbase in Hawaii is effectively whistling in the wind. Doesn't stop anybody who's determined to own Bitcoin.

I first met and spoke with Josh about two years ago in Vancouver. His thesis was solid then, but exceedingly more refined now. Very impressive. In the middle of the interview, inspired by Josh's articulation of the point, I paused for a few minutes and texted to my wife: "Gold is the only element in the periodic table that defies entropy. At an atomic level, it refuses to be acted upon by any other element or compound thereof. Think about that in terms of why gold has been, throughout history, the only enduring form of money. And then contrast it with money based on DEBT." Shortly thereafter, she replied: "Everyone on the planet understood this principle until the banksters realized they could become rich beyond their wildest dreams by brainwashing the masses." Know this, Josh: Your theoretical work in this subject area is highly valuable at this juncture in time. I strongly suspect that your sense of urgency in the matter is, somehow, a reflection of a "disturbance in the zeitgeist" wherein people like my wife and me are actually having these kinds of discussions. These ideas are going to shape our future as we reach the inevitable (and highly disruptive) end of this epoch of debt-based monetary madness. I have read and will continue to read the excellent treatises you and Roy are producing in this realm of economic thought.

I've found his idea about the current system benefiting those who can take on debt to enlighten more people than anything else, quickly leading to should I get a larger mortgage / should I fix its interest rate while I can, etc. Even people with zero interest in finance start to question the value of cash and their bank deposits that way in my experience.

Very well articulated Josh. As for what might "allow" a transformation from fiat to a fixed exchange system...Lee Quaintance and I speculated a while back that it would have to be politically expedient, which reduces to the "right people" (those funding politicians and policy) would have to own it first. In other words, I doubt the Fed or another major central bank would surprise the gold market with an announcement that it will once again be a monetary anchor. I would think the gold price in fiat terms would begin appreciating on some random Tuesday for no apparent reason prior to a formal transformation, which would then provide the windfall. But that's terribly conspiratorial...

Of course, you are assuming that "they" will have the foresight and cajones to effect this transformation of their own volition, rather than simply react to a fait accompli forced upon them exogenously. If they were to act before being acted upon, it would be the first time they have done so in a very, very long time.

A ton of nuggets to mine from this interview. (I know...not even punny:). Actually, it may well be one of RV's many best in '17. Awesome thought provoking content, given the absurb saving/investing environment we face. Josh keep skating to where the puck is going, eh

An excellent interview and Josh has so many brilliant observations on gold and its polarisation in economics and the markets. It was obvious Josh's views resonated with Grant's own beliefs. Having recently finished reading Ron Paul's excellent book "End the Fed", watching this made me think we are coming to the final play in the monetary wars of the last half century, where much like Star Wars we have the guys on the side of light, i.e. classical austrian econmoics advocating a return to gold as money with heroes like Dr Paul , Josh, Grant, etc as our jeddis, while the dark side, i.e the neo Keynesians who are convinced surreal and perpetual debt can continue to protect the elite and suppress the masses, with the likes of Ben Bernanke as the Darth Vader anti heroes. Thankfully as in the movies, there can only be one outcome, albeit the plot is taking longer than most of us expected to play out!